Sunday, February 21, 2016

USD US Dollar Index Monthly Chart

Keystone pointed out the top in the USD four months ago due to the negative divergence and the dollar drops as expected. The MACD cross turns negative and the indicators are weak indicating that lower lows are likely. The question is how low and for how long.

On 3/10/16, ECB President Draghi plans on firing a new QE money bazooka so the euro should drop. It will actually drop ahead of time going into the meeting as traders position themselves. A lower euro will boost the dollar. Thus, the dollar may stay weak and weaken more over the next week or two (which will boost commodity stocks) but as March begins traders will be less enthusiastic about further drops in the dollar.

The central bankers have destroyed markets over the last seven years with their obscene Keynesian money printing. No one truly knows what any asset is worth anymore. Simply looking at the charts there appears to be a whole lot of sideways ahead for the dollar, euro and Treasury yields. Sideways action will frustrate both bulls and bears in all asset classes. The 102 area needs respected since once 98 was breached, 8's typically lead to 2's, so keep that in the back of the mind. If Draghi surprises with huge shock and awe, the euro may plummet in March and that will send the dollar to 102 but this scenario is not a projection and if 102 would occur a retracement back down in quick order would be expected.

The US dollar may weaken further over the coming week or so but will probably begin catching a bid as traders look forward to Draghi's money bazooka on 3/10/16. The dollar should move sideways going forward, sideways with a downward bias for the months ahead. The majority of investors, however, expect big upside in the dollar. Any pop in the dollar in March, maybe into April, due to the ECB's actions may be short-lived. At summer time, the dollar may be hanging around 95-ish depending on how the ECB stimulus is received.

Note the blue sideways symmetrical triangle that Keystone described over the last few years. The vertical side of the triangle is 16 handles with the breakout at 81, thus, 97 is the target which was achieved satisfying the pattern. Price collapsed out the bottom of the triangle in 2011 but this is typical for sideways triangles. At the halfway or two-thirds point, price may exit the triangle and this is typically a fake-out move with price returning inside the triangle and exiting the opposite side (this works in either direction). The dollar returned inside of the triangle and then popped out the top in 2014 as would be expected. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.